ARTICLES ABOUT DEPRECIATION BY DATE - PAGE 5

I believe it is time for our taxpayers in DuPage County take a hard look at what DuPage Airport is costing us. This airport will some day come back and haunt us, not only with the taxes we have to pay but the depreciation in our home values when the overload of cargo planes from O'Hare start to start flying from DuPage Airport. We will have the same nightmare that Bensenville and the rest of the suburbs have with the overflight noise from O'Hare and the depreciation of home values.

Concert musicians were handed a major victory last week when the U.S. Tax Court ruled that two members of the New York Philharmonic could claim tax deductions for their rare and valuable early 19th Century violin bows. The IRS had argued that the husband and wife violinists, Richard and Fiona Simon, weren't eligible for depreciation deductions because the bows were treasured collectibles that would likely appreciate, rather than depreciate, in value for generations to come and that their useful life was indefinite.

What records do I need to keep for tax purposes as a homeowner? You should keep records that show the basis of property you own, which is usually its cost. You must keep records of the purchase price of your home, any purchase expenses, the cost of any improvements and any other basis adjustments, such as depreciation and deductible casualty losses. If you sold your old home and postponed tax on the gain from the sale, you should keep information from the old home, too.

Cost of carry: Direct costs paid by an investor to maintain a security position. Cost of goods sold: The cost of purchasing materials and preparing goods for sale during a specific accounting period. Costs include labor, materials, overhead and depreciation.

THE NEW TAX law scales back deductions for new and recently established home offices. The cutbacks are the result of a measure aimed at trimming writeoffs for commercial real estate. Under the new law, the depreciation period for commercial real estate will be lengthened to 39 years from 31 1/2. That will mean smaller depreciation deductions each year for homeowners who qualify to write off home offices. With few exceptions, the change applies retroactively to home offices set up on or after May 13, 1993.

HOME OFFICE deductions would shrink under a little-known provision embedded in the tax bill recently approved by the House of Representatives. The depreciation period for commercial real estate, which includes home offices, would be stretched to 39 years from 31.5. That would mean fewer depreciation deductions each year for homeowners who are eligible to write off home offices. With few exceptions, the change would apply retroactively to home offices set up on or after Feb. 25, 1993.

My son is 20 years old and going to college. Can I claim him as a deduction? If your son is a full-time student and younger than 24, you may claim him as a dependent on your tax return. You also must contribute at least half of his living expenses for the year. And if you claim your son as a dependent, he cannot claim himself as a dependent on his tax return. For tax purposes, dependents must have less than $2,300 in gross income unless they are younger than 19. They also must be relatives, U.S. citizens and not be filing a joint return with a spouse.

Would you rather put $4,000 to $12,000 in your wallet rather than in the dealer's vault? Then you just might be a prime candidate for a used car. Industry folk who calculate such things estimate that the person who buys a 1-year-old used car saves roughly 20 percent of the depreciation that was absorbed by the original owner. On a 2-year-old used car, you save about 40 percent of the depreciation. On a 3-year-old, it's 60 percent. What that means is that as a rule of thumb the car that cost $20,000 when new will run about $16,000 as a 1-year-old car. On the 2-year-old car, the price becomes $12,000, and on the 3-year-old car, make it $8,000.

Mortgage applicants unfortunate enough to buy or refinance a home in a depreciating neighborhood lost some borrowing power under a recent policy change by a major mortgage fund supplier. Under the new Federal Home Loan Mortgage Corp. (Freddie Mac) rule, borrowers cannot obtain the maximum loan amount possible when the property appraisal indicates neighborhood home values are falling. Instead, the borrower loses 5 percentage points worth of leverage. For example, a first-time buyer who could normally obtain a fixed-rate mortgage with only 5 percent down will have to supply a 10 percent down payment under the new policy.

Q-When we bought our new home about six months ago, we had difficulty selling our old home, so we decided to rent it to tenants. With income tax time coming up soon, we`re wondering how to calculate the cost of the house for depreciation purposes. We bought the house many years ago for $26,000 and it is now worth at least $150,000. I know we have to depreciate it over 27 1/ 2 years, but what is our basis for depreciation purposes? A-Homeowners who convert their personal residence to rental status must depreciate the lower of its adjusted cost basis or its market value on the date of conversion.